(Kitco News) - The gold market continues to experience technical profit-taking against the Canadian dollar, even as the Bank of Canada cuts interest rates and shows less concern about inflation.
In a widely anticipated move, Canada’s central bank cut its overnight rate to 2.50%. At the same time, the Bank Rate fell to 2.75%, and the deposit rate was reduced to 2.45%.
Although the BoC provided little forward guidance on monetary policy, its statement suggests a more nuanced focus on Canada’s slowing economy rather than inflation.
“With a weaker economy and less upside risk to inflation, the Governing Council judged that a reduction in the policy rate was appropriate to better balance the risks. Looking ahead, the disruptive effects of shifts in trade will continue to add costs even as they weigh on economic activity. Governing Council is proceeding carefully, with particular attention to the risks and uncertainties,” the central bank said.
While off its overnight lows, gold against the Canadian dollar remains in negative territory in its initial reaction to the BoC’s latest policy decision. Spot gold last traded at $5,060.73 an ounce, down 0.13% on the day.
Some analysts have said it is not surprising that gold is showing weakness against the loonie, as Canadian investors take profits after prices surged to record highs above $5,000 an ounce.
Gold is holding up much better against the Canadian dollar than against the U.S. dollar. The metal is seeing solid profit-taking against the greenback. Spot gold last traded at $3,676.50 an ounce, down 0.33% on the day.
Economists expect the BoC will continue to ease interest rates through the end of the year.
“With core measures of inflation likely to cool further in the months ahead thanks to the slack building up in the economy and the removal of many retaliatory tariffs on September 1, we not only expect a 25-basis-point cut tomorrow but also a further reduction at the October meeting,” CIBC economist Andrew Grantham wrote on Tuesday.
